As a clue to the end of National Breweries Ltd. in Quebec, consider its 1949 annual report. It’s the final report in digital form in McGill University’s business reports archive before buy-out in 1952 by E.P. Taylor’s Canadian Breweries Ltd.
The report states that sales were down, production and other costs were up, and taxes unchanged from wartime peaks. Hence, earnings were considerably down although a profit was still made, paying a dividend of $2.38 on the common shares. The rate the year earlier was almost $4.00.
The total tax bill absorbed half the sales dollar and had sharply risen since the start of WW II.
While reversing the excess war tax would have improved results other indicators suggested danger ahead.
The report states the company was not able to meet full demand in the peak season. Quebec has a long cold winter and spring, and a short although sometimes hot summer. In those pre-air conditioning days, drinking cold beer was a common way to refresh. I remember growing up in Montreal seeing people drink it on their balconies, stoops, and backyards.
The problem seems to have been structural. National could not make enough beer when it needed to, but most of the year had too much capacity. It had, in a geographically large but comparatively small-population province, six plants: two Dawes plants in Montreal, the Dow and Frontenac plants there, and two small breweries in Quebec City.
Too much capacity, too much work force… The answer seemed clear: reduce excess capacity but modernize plant to enable spikes in sales to be met. A solution required capital investment and rationalization, but National was already paying interest on a debenture draining profits.
It sounds like the company couldn’t afford the first course and delayed the second although they went hand in hand, arguably.
The report states that the company was still in a good competitive position. I think the idea was steadily to increase sales to obtain the revenue to re-invest in the business. Yet, sales had dropped from the year before.
Canadian beer industry historian Allen Sneath, cited in my posts earlier, writes that E.P. Taylor was not able to do a handshake deal with Norman Dawes of National. Taylor had to mount a hostile takeover but was successful as he gained enough of the public float to gain control.
E.P. Taylor, who had limited production in Quebec province before buying National, implemented full rationalization after 1952.* The Dow brewery in Montreal was chosen to make all remaining brands for that city while the Boswell plant did the same in Quebec City. The Black Horse and Boswell brands exited the market, henceforth the focus was Dow Ale.
The corporate name was changed finally to Dow Breweries Ltd.
One has to admire the tenacity of the Dawes family, but wonders what strategy they would have implemented had Taylor not appeared. He came along, as I said earlier, at the right time for the company as a whole. But for one of its brewing dynasties, a saga that commenced in the early 19th century in Lachine, Quebec, the end was reached.
N.B. High taxes again are an issue in the brewing business as the main Canadian beer lobby, Beer Canada, has recently argued. You can parse the figures different ways, but ceaselessly increasing the excise tax together with various provincial mark-ups and other levies on the beer business, even with the break craft brewers get in Ontario, is a mug’s game (sorry!).
While consolidation at the industrial brewing level – the Big Two in Canada, I mean – has reached the limit seemingly, consumers have other options today, wine in particular, but also cannabis, soon to be legal in this country. Government needs to be mindful not to kill the golden goose.
Yes, cannabis will be taxed, but the robust survival of the illegal trade is a real possibility if that rate is seen by consumers as excessive.
Note re image: the images shown are sourced from the City of Montreal’s online museum exhibition on the history and advertising campaigns of Dawes Black Horse Brewery, here. All intellectual property in the images is owned solely by the lawful owner, as applicable. Images used for educational and historical purposes. All feedback welcomed.
*In 1951 National sold the Frontenac plant to Canadian Breweries Ltd. Taylor later turned Frontenac into a Carling Black label plant. National no doubt hoped the money would delay survival but for Taylor, it was simply the beginning of taking the whole prize.